An introduction to U.S. macroeconomic policy issues, such as how we use monetary and fiscal policies to promote economic growth, low unemployment, and low inflation.

Thursday, July 30, 2009

Tax sodapop to fight fat, US health officials say

Economic policy in two sentences: (1) If you want more of something, subsidize it. (2) If you want less of something, tax it. The July 30, 2009 article "Tax sodapop to fight fat, US health officials say" by Karin Zeitvogel discusses a proposal to tax soda to discourage its consumption:

WASHINGTON (AFP) – US health sheriffs want to ride the sugary drinks that are helping to make Americans fat out of town, or at least off Americans' menu of choice, and one way they suggest going about it is by taxing sodapop.

"The average American consumes roughly 250 calories more today than they did two or three decades ago, the head of the Centers for Disease Control and Prevention (CDC), Thomas Frieden, said at the "Weight of the Nation" conference on obesity held in Washington this week.

"And of that, about 120 calories is in the form of sodas and other sugared food and beverages," he said.

The average daily recommended caloric intake for adults is about 2,000 calories per day, a number that varies depending on a person's sex, height, weight and rate of activity.

Two-thirds of American adults are obese or overweight -- or shaped more like the bulbous Orangina bottle than the hourglass classic Coca-Cola bottle -- and obesity-related illnesses cost the United States nearly 150 billion dollars a year, health officials at the conference were told.

A soda tax would not only help Americans to slim down but could raise revenues that would help to offset the rising sums spent to treat preventable health conditions caused by obesity.

"The estimates we've seen suggest that a one-penny-per-ounce tax nationally would raise something in the order of 100 to 200 billion dollars over a 10-year time frame, as well as significantly reducing caloric intake -- at least from soda and sugar-sweetened beverages," Frieden said.

According to Julie Greenstein of the Center for Science in the Public Interest (CSPI), around 40 of the 50 US states already have soft drink or junk food taxes, but they are usually too low to have an effect on consumption.

The CSPI, which has advocated for health, nutrition and food safety in the United States since 1971, says a soft drink tax would "be a great way to pay for health reform and expansion" and wants to see such a tax imposed nationally.

A tax on soft drinks was included as a possible option in the health reform bill drafted by the Senate finance committee, said Greenstein, although she was unsure if the proposed levy would make it through to the final version of the proposed health care legislation.

"The soft drink industry has a very powerful lobby," she said.

Last week, the Coca Cola Corporation was quoted in the Financial Times as saying that "the consumer in this environment is not ready for a tax on a basic staple like non-alcoholic beverages."

Frieden has based his call for a soda tax on the campaign he instigated in New York City, where he was health commissioner for seven years, which practically ran the Marlboro man out of town.

A year after he became health commissioner of New York in 2002, Frieden started raising taxes on cigarettes to the point where if you buy a packet of 20 in the Big Apple today, you don't get much change from 10 dollars.

He reasoned that people would kick their cigarette habit if it cost too much. And he was right.

"We reduced adult smoking by 25 percent and teen smoking by 50 percent in six years. About half of that reduction was the result of taxation," Frieden said.

A similar tactic applied to sodas could help to cut consumption of the sugary drinks, he reasoned, but added that the decision to impose a national soda tax was one for the politicians, not health officials.

"Whether it gets done is a political question, but what we can say as the nation's prevention agency is that obesity is an enormous problem, and price interventions are likely to be effective," he said.

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The following information is provided to help you understand the biases that may be inherent in this blog.My primary U.S. economic policy concern is the fiscal irresponsibility of government.The Baby Boom generation, which I am part of, has spent the past 30 years accumulating massive public debt that will be passed to our children, grandchildren, and subsequent generations.I am not opposed to the reduction or elimination of any government spending program.Yet, politicians tend to call for reduced spending in general terms and fail to publicly declare specific cuts they would make.The primary cause of the massive U.S. public debt is revenue reductions (in the form of tax cuts) without similar decreases in government spending.

I am willing to consider the expansion and addition of government programs as well.I do not mind how much or little the government provides to society as long as it is paid for.I am willing to pay higher taxes for services deemed worthy, whether they be national defense, homeland security, or income assistance to those less fortunate than I.And I am certainly willing to pay less in taxes or to deposit any government check I receive.My generation, the Baby Boomers, has been very good at cutting taxes and increasing the size of government, regardless of which political party is in power.This is a prescription for financial chaos that remains a horrible legacy for future generations.

About Me

I am a professor of economics at Jacksonville University, where I teach courses in introductory economics, comparative economic development, and globalization. I use this blog to keep in touch with my current and former students. Teachers and students at other schools, as well as others interested in economic issues, are welcome to use this resource.